The European luxury goods sector has risen strongly in the last three months, driven by a discernible improvement in sentiment. Sentiment has improved the most in Asia and China, with rising confidence in the region a result of a smooth transition of leadership in China.

To put this performance into perspective, the MSCI World Consumer Discretionary Index managed only 9.9% during this period, while the MSCI Europe Index lagged further behind, adding just 8.5%.

According to a recent report from Nomura, the Tokyo-headquartered investment bank, a number of datapoints allude to an improvement in luxury fortunes in Asia – the most important region for luxury goods companies. In particular, the bank points to a strong start to 2013 for Macao gaming revenues; accelerating Swiss watch sales data in China; and an improvement in retail sales in Korea, Japan, and Hong Kong (all major consumers of luxury goods).

Anecdotal comments are also supportive of the sector. For example, Chow Tai Fook, a Hong Kong-based jeweller with over 1,000 stores in mainland China, suggested that fewer retailers exited the sector in Q4. Similarly, European luxury brands including Swatch, Ferragamo and Burberry have all commented on an improved macroeconomic environment.

That said, concerns remain. According to Nomura, air cargo data, typically indicative of economic growth, have shown three months of deterioration and European and US domestic same-store sales remain challenged, though weakness in the US could be linked to Hurricane Sandy and fiscal cliff concerns.

However, while caution is needed, Nomura is bullish on the sector: “We continue to see a more positive outlook for luxury goods, with upside risk to organic sales in 2013. We would use any weakness on short-term trading to enter the sector for the long term, which we see as a structural growth opportunity.”

This long-term outlook is underpinned by powerful cultural, economic and demographic trends in developing countries which should continue to support robust growth for luxury goods. For example, emerging markets are forecast to account for 73% of global luxury goods sales by 2020, with China surging to a 44% share from just 15% today. Behind this anticipated growth is the expansion of the middle class. The BRIC countries (Brazil, Russia, India and China), for instance, are expected to have over one billion middle-class consumers by 2015, a gain of almost 400 million over 2010.

When it comes to luxury, Europe rules. The region (including the UK) is home to some of the world’s best known and admired luxury brands; brands which the newly wealthy in emerging markets aspire to own. Listed European luxury companies include LVMH, which owns brands such as Louis Vuitton, Givenchy and Tag Heur; Compagnie Financiere Richemont, owner of brands such as Louis Cartier, Montblanc and Alfred Dunhill; PPR, the firm behind Gucci, Yves Saint Laurent, Stella McCartney and Brioni, among others; Burberry; Christian Dior; Luxottica, which owns Ray-Ban and Oakley; Hugo Boss; Daimler, owner of Mercedes Benz; BMW; and Porsche, to name but a few.

Usefully for investors, all the above companies are included in the MSCI Europe Consumer Discretionary Index. This means that exchange-traded funds (ETFs) benchmarked to the index provide investors with an efficient low-cost means of accessing luxury brands (luxury brands comprise about 50% of the index).

And for investors concerned about taking on exposure to Europe, it’s worth noting that these companies generate a significant proportion of their sales from outside of Europe. For example, Richemont, LVMH, PPR, Burberry and Luxottica do only around a third or less of their business in Europe. Moreover, luxury sales recorded in Europe are often to foreign tourists from countries such as China and Japan. Thus the actual economic exposure to Europe is less than a simple revenue breakdown would suggest.

UK and European investors looking to access this index have a couple of funds at their disposal: